Many of today's complex products require relatively short factory assembly times, but incorporate parts whose manufacture and acquisition require long lead times. Where the demand for a product is known, the manufacturing operation can be planned so that its parts are procured and arrive at the manufacturing facility at optimum times. By contrast, where parts are acquired according to forecasts, but assembly of the product is delayed until an order is received, solution to the parts procurement planning problem becomes more complex.
Some of the complexities are as follows. First, product forecasts (in which products the parts are to be incorporated) are to a great extent, educated guesses which are often expressed in probability terms, i.e. a mean value and a standard deviation. Second, parts to be incorporated in various products may be common to a plurality of products or usable with only one product. Third, consideration must be given to a "service" level to be achieved. service is defined as the probability that all product demands are met at least a specified percentage of the time. Fourth, inventory levels must be considered and, preferably, minimized so as to conserve required capital.
As above stated, a manufacturing system which requires a short assembly time but long component procurement lead times is often operated on an "assemble to order" basis. Examples of such manufacturing facilities are found in electronic assembly and test plants and in final "box" assembly plants. In printed circuit card assembly plants, the time to complete assembly and test is typically a week or two, while the time for procuring integrated circuits which are mounted on the cards is typically two to three months or more. In "box" assembly plants, assembly and test is typically on the order of several days, while some of the high technology subassemblies, such as disk drives, may have lead times of months or more.
Such manufacturing facilities are often operated in "just-in-time" or in a pull-driven manner. Such methods reduce the level of finished goods inventory required to respond to market demands. The critical factor in making such approaches successful is the ready availability of all parts that make up the product. Clearly, because of procurement lead times, it is not possible to obtain the parts when the demand for the product is actually known. Thus, procurement decisions have to be made long in advance. As a result, such procurement decisions are made based upon product forecasts.
The prior art contains a number of references which efficiently handle manufacturing and procurement scheduling where product demands are deterministically known. For instance, in U.S. Pat. No. 4,646,238 to Carlson, Jr. et al., a materials requirement planning method is described which is dependent upon prestored information relating to the demand and inventory of all product grades. The system enables the number of common components to be determined and adjusts the inventory to meet projected demands. In U.S. Pat. No. 4,459,663 to Bye, actual and planned customer orders are employed to control manufacture of end item products and components. In U.S. Pat. No. 4,887,206 to Natarajan, a cost analysis system employs an inventory model to evaluate work-in-process and assess cost impacts resulting from engineering change requests. Similar teachings can be found in U.S. Pat. No. 4,920,488 to Filley and 4,924,385 to Dote.
As above indicated, an objective in "assemble to order" environments is the minimization of investment in parts while assuring a required level of service across the products, even in an environment of uncertain product demand. Achievement of this objective is beyond the capabilities of current materials requirement planning systems, since such systems treat demand deterministically. Ad hoc procedures to deal with the problem using materials requirement planning systems usually result in excessive parts inventory.
The prior art has attempted to deal with such uncertain demand environments but has only done so with respect to simple product structures and/or part procurements limited to a single time period. Baker et al. in "The Effect of Commonality on Safety Stock, a Simple Inventory Model", Management Science, Vol. 32, Number 8, August 1986, considers two products whose demands are uniformly distributed, each product having a unique component and a common component, all having the same price and being used once in each product. Baker et al. show that the introduction of commonality reduces the total inventory required to meet a specified service level and to provide an optimal solution. Beyond two products and uniform distributions, however, the Baker et al. method is not applicable.
Gerchak et al. extended the Baker et al. work in "Component Commonality With Service Level Requirements", Management Science, Vol. 34, Number 6, June 1988. Gerchak et al. consider arbitrary numbers of products, however all have only one unique component and share one common component. Only a single time period is considered. No method is given for solving this expanded problem as well as for a more complex problem where pluralities of parts are distributed among pluralities of products, some parts being common to a plurality of such products.
Accordingly, it is an object of this invention to provide an improved method for parts procurement in an "assemble-to-order" environment.
It is another object of this invention to provide an improved procurement method which accommodates unknown random product requirements.
It is still another object of this invention to provide an improved parts procurement method which assures that a specified service level is achieved while maintaining a minimum excess parts inventory.